Partnership Agreement / Deed:
Partnership is the result of an agreement between persons to share the profits and the losses of the business they intend to do. The agreement may be oral or written. Oral agreement may not be helpful in solving many difficulties and problems. It is therefore usual to have partnership agreement in writing. Written partnership agreement is called Partnership Deed or Articles of Partnership.
“Partnership Deed is a document which specifies the terms and conditions that bind the partners into the relationship”.
It must be signed by all the partners and every partner must have a copy of the partnership deed. In absence of the written agreement or if a copy of the partnership deed is not submitted to the registrar of the firm, partners cannot enforce the conditions laid down in the agreement in the court of law.
Contents of Partnership Deed:
Partnership deed usually contains the following items:
- The name of the firm and names and addresses of the partners.
- Nature of the business and the place of the business.
- Date of commencement of partnership
- The duration of partnership.
- Total capital, amount of capital contribution by every partner and the mode of contribution.
- Division and task and responsibility, i.e. duties, powers and obligations of all the partners.
- The ratio of the distribution of profits and losses among the partners.
- Amount which can be withdrawn by the partner.
- Interest on capital, loan and interest to be charged on drawings.
- Amount of salary or commission payable to any partner for his services to the firm.
- Rules to be followed in case of retirement, admission and death of a partner.
- Maintenance of the books of accounts and audit of the accounts.
- Mode of valuation of goodwill on retirement, death or admission of a partner.
- Procedure of the dissolution of the firm and the mode of settlement of the accounts after dissolution.
- Method of revaluation of assets and liabilities on admission, retirement and death of a partner.
- Removal of partner in case of frauds and breach of duty.
The terms laid down in the deed may be varied by the consent of all the partners.